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How to Leverage High-Interest Savings Accounts to Grow Your Money
- Authors
- Name
- David Botha
How to Leverage High-Interest Savings Accounts to Grow Your Money
Let’s be honest – saving money can feel like a slow, frustrating process. Especially when interest rates are low, it's easy to feel like your savings aren’t actually growing. But what if I told you there’s a simple, effective way to significantly accelerate your savings growth? The answer: High-Interest Savings Accounts (HISA).
What is a High-Interest Savings Account?
Traditional savings accounts typically offer incredibly low interest rates, often just 0.01% – 0.25%. This means your money is essentially losing value due to inflation. A HISA, on the other hand, offers a substantially higher interest rate, usually expressed as an Annual Percentage Yield (APY). As of March 30, 2021, many HISA rates are hovering around 1% – 4%, which is a huge difference.
Why Use a HISA?
Here's why HISA's are worth considering:
Increased Returns: Even a small difference in APY can add up over time. Let's look at a quick example:
- Low-Interest Account (0.25% APY): If you save 12.70 in interest.
- High-Interest Account (3% APY): Saving the same 188.62 in interest.
Combat Inflation: Inflation eats away at the purchasing power of your money. A HISA helps you keep pace with rising prices.
Flexibility: Most HISA accounts offer easy access to your funds via online transfers, debit cards, and check imaging, just like a regular checking account.
How to Find the Best High-Interest Savings Accounts in 2021:
Shop Around: Don’t settle for the first HISA you find. Compare APYs, fees, and minimum balance requirements from different banks and credit unions. Websites like Bankrate, NerdWallet, and DepositAccounts.com are excellent resources.
Consider Online Banks: Online banks often offer significantly higher APYs than traditional brick-and-mortar banks. This is because they have lower overhead costs. Some popular options to explore include:
- Ally Bank
- Capital One 360
- Discover Bank
- SoFi
Check for Promotional Rates: Many banks offer introductory promotional rates to attract new customers. Be sure to understand the terms of these promotions – they often expire after a certain period.
Understand Fees: While most HISA accounts have no monthly fees, it’s still important to check for any potential fees, such as fees for excessive withdrawals.
Minimum Balance Requirements: Some HISA accounts require a minimum balance to earn the advertised APY. Make sure you can meet this requirement.
Tips for Maximizing Your HISA Growth:
- Automate Savings: Set up automatic transfers from your checking account to your HISA each month. Even small, consistent contributions can make a big difference.
- Don’t Touch It (Unless Necessary): Resist the temptation to dip into your HISA for non-emergency expenses. The more you avoid withdrawing funds, the more interest you’ll earn.
- Take Advantage of Compounding: Interest earned on your HISA is added to your principal, which then earns more interest. This compounding effect significantly boosts your savings growth over time.